The marketh health indicators are currently negative. I will not be taking swing trades on the long side until conditions improve. The reasons why are discussed below.

During this time, short-term trades and longer-term trades are an option. I discuss this at the end of the article.

How the Market Indexes Are Doing

I look at 4 different indexes because they each tell a different story about overall stock market health. The stock market is healthiest, and swing trading stocks on the long side is most profitable, when all these indexes are in uptrends.

The Nasdaq 100 is still in pullback mode. The S&P 500 is neutral but started moving down on Friday again. The NYSE is in a bigger correction, well off its November highs, and the Russell 2000 is very weak and at the bottom of a nearly year-long range.

Given this, it’s not an ideal time to be piling into long trades.

State of the Market Health Indicators

The following chart shows the market health indicators I track. They also tell me the condition of the stock market overall, and whether it is a good time to be swing trading individual stocks.

• 48% of S&P 500 stocks are above their 50-day moving average. 26% of all US stocks are above their 50-day moving average. It is generally much easier to swing trade profitably (on the long side) when more stocks are above their 50-day average. The current low level means lots of stocks are in short-term downtrends currently; although large-cap stocks are fairly ok.
  • Despite how the S&P 500 makes it look, the MAJORITY OF STOCKS are in at least short-term downtrends.
    
• Volume is elevated on the selling.
  
• The red bars are showing Upvolume divided by Totalvolume on the NYSE exchange. Above 0.9 or below 0.1 are values I tend to watch for. Nothing of interest here currently.
  
• The blue bars are the daily percentage movement of the S&P 500. Big moves are associated with downtrends and turning points. Small values are associated with an uptrend. Values of -2 are a warning sign anytime they occur. We had a 2.2% drop on Nov. 26. That warns of increased volatility (which has continued), typically associated with downtrends or whip-saw periods as opposed to uptrends (small numbers). We remain in a elvated volatility environment currently.
  
• The blue line is the cummulative NYSE Advance Decline Line. The drop in this lines warns of low participation in the rally that the S&P 500 is showing. In other words, some stocks are risking while most are falling. Not ideal for swing trading on the long side aggressively.

Conditions can turn quickly. If the indexes show more strength to the upside, I will be buying into stocks on the long side. But for right now, I am limiting the swing trades.

The Complete Method Stock Swing Trading Course is currently 20% off during the Black Friday sale. It covers how to assess market health so that we are trading at ideal times, and saving our capital when conditions aren’t ideal. It also reveals several swing trading strategies.

What Am I Doing Right Now

I am not too concerned about taking many trades into the holidays.

That said, as I have discussed over the last few weeks, there are some things I am doing to keep my internal trader occupied:

• Looking for strong earnings announcements or moves, waiting for a small daily trigger candle, and then trailing a stop loss. These trades capture short burts of momentum, but get me out as soon as it reverses.
  
  
• Day trading forex. It provides consistent patterns nearly every day, regardless of what the stock market is doing.
  
  
• As stocks decline, I am looking for high quality companies to buy at great prices in my “long-term/retirment” account…like those on the Buy the Dip Stock List. I also buy index funds in my long-term account as they fall pre-estatablished amounts.

Doing these types of optional trades isn’t required. The standard approach to swing trading covered in the Complete Method Stock Swing Trading Course does just fine on its own. But if you find you are compelled to take swing trades, even when conditions aren’t good, then maybe adding in some of these other trading styles may be an option for you.

By Cory Mitchell, CMT

Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.